IABC

1. IABC WELCOME

2. Entering the World of Internal Audit

3. IABC Corruption At a Glance Global Financial Integrity (GFI) Top 5 Countries (Highest measured cumulative illicit financial outflow) 2000 to 2009: USD 2.74 Trillion USD 504 Billion USD 501 Billion USD 350 Billion USD 380 Billion

4. New IA Survival Boot Camp Surviving the first 60 days Main Programme • Introduction • Internal Audit Profession • Internal Auditor Toolset • Internal Auditor’s Skills Requirement • Business Evaluation Techniques • Business Environment Awareness • Audit Program Design & Planning • Project Management

5. IABC Introduction Facilitator- Jerry Lee, FCCA, CPA, CIA, CRMA A Practitioner in Internal Audit/ Risk Management/ Business Operations Review: • 15 years, 3 MNCs • 450 business operational reviews over 120 locations (Asia Pacific, SEA, Europe, etc.) • Multiple Industries (Chemical, Pharmaceuticals, FMCG, Home Appliances) • Project Management (Business restructuring, re-engineering, SOX 404) • Generated RMB 7 million savings for business projects

6. My Travel

7. IABC Getting to know You Introduction • Name • Year (s) in Internal Audit • Company & Industry • What is your objective?

8. IABC Learning Objectives • Understanding the challenges of being an Internal Auditor • Understanding the perceptions & opinions on internal auditors • Equip you with a set of practical skill

9. IABCPerception of the Auditor • Follow the book, Bloodhound • Stubborn • Not Practical, Do not know the business • Living in their own world • No Comments ………….

10. IABCPerception of the Auditor How did the auditor cross the road? He looked at the P- file and followed last year’s working papers.

11. IABCIs the Auditor that bad?

12. IABCThe Auditor -Bloodhound?

13. IABCThe Auditor-Stubborn Detective ?

14. IABCWho Audit the Auditor? Auditor

15. IABC Introduction to Internal Auditing • IIA & IPPF • Definition of Internal Auditing • International Professional Practices Framework (IPPF) • Code of ethics (Rules of conduct) • Attribute Standard (Practice Advisory) • Performance Standard (Practice Advisory)

16. IABCDefinition of Internal Auditing Internal Auditing is an independent, objective assurance and consulting activity to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

17. IABCInternational Professional Practices Framework (IPPF) IPPF • Organize the Institute of Internal Auditors (IIA) authoritative guidance for ready access on a timely basis • Structural blueprint of knowledge and guidance , facilitates consistent development, interpretation, and application of concept, methodologies and techniques • Assist practitioners and stakeholders throughout the world in being responsive to expanding markets for high quality internal auditing.

18. IABCCode of Ethics Principles that are relevant to the profession and practices of internal Auditing. Rules of Conduct describe the behavior norms expected of internal Auditors.

19. IABC Code of Ethics Principles & Rules: Integrity …. Objectivity …. Confidentiality…. Competency ….

20. IABCAttribute & Performance Standards Attribute Standards – Purpose, Authority & Responsibility Practice advisory – 1000-1 to 1321-1 Performance Standards- Managing the Internal Audit Activity Practice Advisory- 2000 to 2600

21. IABCOur Existence- Value Add

22. IABCInternal Audit Department Set up • Department Structure • Mission/ Charter Statement • Audit Manual • Reporting & Work Procedures • Audit Committee

23. CAE Assistant Area Director Area Director Area Director Area Director Area Director Manager Senior Auditor Auditor • Manager • Senior Auditor • Auditor • Manager • Senior Auditor • Auditor • Manager • Senior Auditor • Auditor • Manager • Senior Auditor • Auditor IABCAudit Organization

24. IABCMission & Charter • To perform independent objectiveassurance and consulting activities designed to add valueand improve the company’s operations. • To help the company to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of the governance, internal control and risk management processes.

25. IABCMission & Charter Internal Audit Based on risk assessment input, plan & roll out the audit strategy to fulfill Board objectives in Operational, Financial & Compliance audits. Financial Diligence Perform and coordinate financial due diligence activities in acquisition and divestment situations. Internal Control Formulate action plans to improve governance, internal controls and risk management processes, e.g. SOX Programme Consulting Perform consulting activities designed to improve the company’s operations.

26. Scheduling & confirmation Audit Visit Letter Preparation Audit work program Draft Audit Report Mgt. Response Finalize Report Post Audit IABCAudit Manual Planning Completion Execution Operational Audit Financial Audit Risk Theme Audit Special Projects Field work Audit Close Meeting Audit Open Meeting

27. Internal Auditvs. External Audit IABCIA vs. EA Internal Audit – Risk Management + Control Design Impact + Financial Impact + Financial Standards Compliance + Environmental Impact External Audit- Materiality Level +Financial Standards Compliance + Environmental Impact

28. IABCIA vs. EA Internal Audit External Audit WP regulated Mostly Local focused • WP regulated by IIA • Mostly Regional focused

29. IABCIA vs. EA Internal Audit External Audit FRS, GAAP, etc. Regulation (with exceptions) A set of Programs Financial Compliance inclined Detailed business knowledge limited to audit • IIA, IPPF & COSO Framework • Need & Regulation (For Listed) • A set of Programs • Operations Inclined • Detailed business knowledge required

30. IABCFieldwork Internal Audit External Audit Sample (follow a basis) Flowcharts Detailed business knowledge limited to audit Management Letter & Audit Report • Sample (often judgmental) • Flowcharts • Weaknesses Focused • Design • Operating • Recommendations & Follow up

31. IABCFieldwork Internal Audit External Audit View- Restricted Interaction Restricted Assignments Supported by law • View- Complete Process • Interaction Multiple Levels • Assignments & Projects • Often very challenging situations

32. IABCInternal & External Auditors Internal External Financial related basic Training Financial & Business (limited) knowledge Thought process- Compliance • Financial related basic Training • Financial & Business Knowledge • Thought Process- Risk

33. IABCIAWork Flow Process • Planning Discussion & Audit Announcement • On-Site Opening Meeting • Field Work • On-Site Closing Meeting • Issue Draft Report • Issue Final Report • Follow up on audit report on pre-determined deadline

34. IABCThe Real Internal Auditor?

35. IABC Internal Auditor’s Skill Requirement Auditor’s Credo • Integrity (honest, diligent & responsible) • Objectivity (unbiased assessment) • Confidentiality (protection of information) • Competency (seek help if necessary) • Consistency (Principle applications)

36. IABCInternal Auditor’s Skill Requirement Composure Mechanism • Be open to constructive criticism • Engage only after you have taken a step back, do not react immediately • Never get personal • Deal with the emotion not the person • Argue on fact, never “ass-u-me” • Maintain a cool composure under fire

37. IABC Internal Auditor’s Skill Requirement Profession Skill • Interviewing Techniques • Presentation skills • Body Language Observations • Report Writing • Closing Meeting Etiquette

38. IABC OperationEvaluation Technique Evaluating the business- Eagle Technique • Relate the sub-sections to the whole • Read about the business and its recent development • Review information collected during discussion • Retain Objective in sight

39. IABC OperationEvaluation Technique Evaluating Controls - Path Finder Technique • What can go wrong ? • Where can I find it ? • Who is doing it ? • When can it happen ? • Why did it happen ? • How to prevent ?

40. IABC Operation Evaluation Technique • Operations • Processes • Procedures Risk Management What Can Go Wrong !!!

41. IABC OperationEvaluation Technique Operations Risk Management What Can Go Wrong Procedures Processes

42. IABCOperationEvaluation Technique Weakness/ Risk • Design Control Weakness • Inadequate knowledge • Operating Control Weakness • Over-ride or errors not detected • Inherent/ Environment • Countries with weak regulations • Excessive Manual workaround • Segregation of Duties (Lean operations)

43. IABCOperationEvaluation Technique Quantifiable cost of weak controls or the lack of it: RMB 5 Million……. Not Quantifiable…..????

44. IABCOperationEvaluation Technique Factors to consider when assessing the severity of an issue. • Design Control Weakness • Operating Control Weakness • Inherent Weakness

45. IABCOperationEvaluation Technique 4R methodology of good controls • Robust controls (design & operating) & review • Regular review on processes & procedures • Revise Delegation of Authority in line with changes • Who is authorized to sign • What is the amount authorized • What are the types • Regulate granting of system access rights

46. IABC Playtime

47. IABCBe The Auditor Task: • Complete this fact finding issue with a recommendation for a closing meeting conducted at the end of an audit week. • Construct a short paragraph to be included as part of the Executive Summary: • Title (representing the issue) • Problem • Impact • Management actions (presume management has agreed) • From your group, role play and present the issue in a closing meeting scenario

48. IABCBusiness Environment Awareness

49. IABCBusiness Environment Awareness Before Getting There • Flight - Timing • Hotel - Distance • Living Environment – Duration, Comfort • Transport & Traffic – Distance • Audit Preparation- Work Review

50. IABCBusiness Environment Awareness • The People • General Manager • Financial Controller • Finance Manager • The Office • The Culture • SEA • Asia Pacific • European • Americas • The Country